PPL interstate transmission project both costly and lucrative

PPL wants to build a new transmission line that will span Pennsylvania and extend into three other states. This line is in the Delaware Water Gap National Recreational Area in Monroe County.

PPL wants to build a new transmission line that will span Pennsylvania and extend into three other states. This line is in the Delaware Water Gap National Recreational Area in Monroe County. (FILE PHOTO/HARRY FISHER, THE MORNING CALL)

Sam Kennedy, Of The Morning Call

PPL Electric Utilities has plans to build a new electricity transmission network that would span Pennsylvania and branch into New York, Maryland and New Jersey, the utility announced Thursday.

At the heart of the massive undertaking — expected to cost ratepayers $4 billion to $6 billion and possibly earn PPL hundreds of millions of dollars in profit — would be a 500 kilovolt line running 725 miles.

If approved, PPL predicts, the project will improve energy reliability and security and provide customer savings by eliminating transmission bottlenecks and encouraging development of lower-cost natural gas-fueled generation plants.

The new plants would help replace energy supplied today primarily by coal-fired plants that, under increasingly stringent federal air quality standards, are expected to be retired in coming years.

"This is a forward-looking project with significant benefits for customers for several states and for the region as a whole," said Gregory Dudkin, president of PPL Electric Utilities.

The project also would be a significant source of revenue for PPL Corp., PPL Electric Utilities' Allentown-based parent. Under Federal Energy Regulatory Commission rules designed to encourage infrastructure investment, utilities may earn a profit of 11.68 percent on transmission projects.

That translates into a profit of up to $700 million. PPL would share the money with any other utilities that participate in the project.

PPL customers, meanwhile, would see the cost, including utility profits, reflected in their rates — though the burden of paying for the project would be shared by ratepayers in all four states involved.

How much individual customers would have to pay would depend on how much they are expected to benefit.

In the case of the now nearly completed Roseland-Susquehanna interstate transmission line, for example, PPL's customer base was assigned 5 percent of the project's $1.2 billion cost. For individual residential customers, that translates into about 30-50 cents a month over a 20-year period.

This week, PPL submitted an application for the project to PJM Interconnection, which oversees the regional power grid for most of the Mid-Atlantic states in addition to Ohio and West Virginia and parts of Michigan, Kentucky, Illinois, North Carolina and Tennessee. The project also would need approval from numerous other federal and state agencies.

The precise layout of the proposed transmission network has not been determined, but PPL has started a "comprehensive regional planning effort."

The project would create thousands of construction jobs and fuel economic development by providing reliable, lower-cost power, according to PPL.

The timeline for the project envisions completion between 2023 and 2025. Construction could begin in 2017.

"As you can imagine, because it's so far out, and there are so many moving pieces," he said, "we really don't have a forecast that we could point to, to suggest which way prices would move as result of this transmission project."

Before PPL embarked on its Roseland-Susquehanna line, experts told The Morning Call that the project, by allowing Pennsylvania's relatively inexpensive electricity to flow into New Jersey, could result in higher rates for Lehigh Valley residents.

But according to PPL spokesman Paul Wirth, any such effect this time would be more than offset by the savings associated with fewer bottlenecks and more natural gas-fueled generation plants, resulting in lower wholesale prices.

And the lower prices, he continued, would more than offset any rate hikes to pay for the project.

"We do believe, generally, customers will see an economic benefit," he said.